Eight out of 10 mortgage holders have no income protection

Homeowners in Britain are woefully under-prepared in the event of long-term sickness, accident or ill health.

According to the latest State of the Protection Nation report from Royal London, 42 per cent of people with a mortgage have no life cover in place.

Moreover, 71 per cent of people with a mortgage have no protection in place should they become diagnosed with a critical illness, while 81 per cent of Britons with a mortgage have no income protection in place.

Toby Bainbridge, head of protection solutions at Royal London, said: "Buying a home and starting a family are still the two main triggers for buying protection, but this leaves working renters vulnerable to losing the roof over their head if illness or an accident struck and they were unable to work.

"The need to protect their lifestyle is just as important as it is for homeowners.”

The Royal London study, which was carried out by pollster Opinium among 2,005 UK adults, as well as 200 interviews with UK IFAs, also highlighted the reasons behind people's lack of take-up of protection products.

According to the study, the top reason people gave for not taking out protection was they think premiums are too expensive (69 per cent).

There is a lot the industry needs to do to better connect with younger homebuyers and renters as well.

Robert Harvey

Mr Bainbridge said: "Sadly it is only when illness strikes or an accident happens that people realise how valuable the financial protection from an income protection or critical illness plan can be.

"This will be a challenge to overcome as time and again people say insurance is expensive and won’t payout which clouds their view of the market. We need a concerted effort by the industry to address these misconceptions.”

Another reason for the lack of protection take-up is inertia.

The report stated: "Inertia plays a part in people’s decision not to buy, as 20 per cent of full-time working people recognise they need income protection but don’t have a policy.

"Over a third of people working full-time feel they don’t need income protection, but just 8 per cent said they didn’t need it because they had cover with their employer."

Source: Royal London State of Protection Nation report

The report also carried out interviews with financial advisers.

More than two-thirds of advisers believed consumers who reject protection simply did not not recognise the benefit.

Some 49 per cent of advisers felt that inertia was the biggest challenge, while approximately 50 per cent of advisers the challenge is their clients don’t believe they will get ill.

However the report also said advisers are upbeat and optimistic, predicting a stable market for sales in 2018 and reporting that last year was a good year for protection sales.

Robert Harvey, insurance specialist for Drewberry, said: "A lot of the banks left the financial advice market and the protection market so perhaps they are not longer hitching life insurance to a mortgage product now.